RBI Plans New Rules To Restrict Private Equity Control In Multiple NBFCs, May Ease Scrutiny On Stakes Up To 15%

The Reserve Bank of India (RBI) is reportedly preparing regulations that could prevent private equity firms from holding controlling stakes in more than one non-banking financial company (NBFC).

According to a report by Reuters, the proposed restrictions aim to prevent financial difficulties at a global investment firm from affecting multiple Indian lenders.

The central bank is also considering lighter regulatory scrutiny for smaller investments, particularly holdings of 15% or less.

Draft regulations could be finalised following public consultation and formally issued early next year.

Under existing rules, control may arise through substantial shareholding or the ability to influence management decisions.

For listed companies, a 25% stake can constitute control, while smaller holdings may also qualify if investors can appoint most directors or determine company policies.

The RBI has previously imposed conditions on investments involving multiple NBFCs.

Bain Capital's acquisition of a 41.7% stake in Manappuram Finance received approval subject to the firm divesting its 93% holding in Tyger Capital, formerly Adani Capital.

Similar concerns have reportedly emerged regarding Japan's Mizuho Financial Group, which holds majority stakes in Mizuho Capsave and Credit Saison India.

Reports indicate that the RBI has sought a consolidation plan from Mizuho amid its proposed acquisition of Avendus.

Foreign investor interest in India's financial sector has increased amid strong credit demand and relatively low loan delinquencies.

According to Grant Thornton, private equity investments reached $5.4 billion last year, increasing 6% from 2024.

Another $3.6 billion flowed into the sector through September this year.

As per the report, the Indian Venture and Alternate Capital Association has sought permission for separate entities within investment groups to hold stakes exceeding 20% in multiple NBFCs.

The proposed rules could reshape how global investors structure their holdings in Indian financial companies.